Private equity deal value in Asia Pacific plunged 44% year-on-year to $198 billion in 2022, ending two years of record dealmaking, according to Bain & Company’s Asia Pacific Private Equity Report 2023.
Private equity deal value in Asia Pacific plunged 44% year-on-year to $198 billion in 2022, ending two years of record dealmaking, according to Bain & Company’s Asia Pacific Private Equity Report 2023.
The report says slower economic growth, declining consumer confidence, falling manufacturing output, high inflation, and mounting global and regional uncertainties resulted in a perfect storm which dampened investor sentiment.
Across the region, deal value declined between 25% and 53%. Greater China and Southeast Asia saw the greatest fall at 53% and 52%, respectively, according to Bain & Company’s research, with the former challenged by uncertainties relating to the zero-Covid policy, geopolitical tensions and tech regulatory crackdowns, and the latter faced with fewer growth deals. Deal value in Australia-New Zealand (ANZ), Korea and Japan dropped 48%, 39% and 28%, respectively. Deal value in India meanwhile, declined 25%.
According to the report, Greater China continues to hold the lion’s share of the region’s total deal value although it plummeted to 31%, a nine-year low. India and ANZ increased their shares to 23% and 19%, respectively.
When it comes to deal type, the report reveals that growth deals continued to outpace buyouts in 2022, producing 54% of deal value, up from 50% in 2021. However, the total value of large growth deals above $200 million fell 45% in 2022 compared with the previous year. Investors’ shrinking appetite for risk and the dramatic drop in the value of technology companies on stock markets contributed to this trend, according tom Bain.
Growth deals dominate most of Asia Pacific’s markets except for ANZ and Japan, where investors favour buyout deals, according to the report, with carve-outs were again an important buyout theme in 2022, especially in Japan and Korea where a challenging economic environment prompted conglomerates to focus on their core businesses and sell non-core operations.
An uncertain business outlook and lower ratings for public companies helped push valuations down to 12x from 13.1x (median EV/EBITDA) a year earlier. Similarly, tough market conditions pushed some investors to the sidelines in 2022, with the report highlighting that the number of active investors in Asia Pacific fell 2% year-on-year, the first drop since 2015. The region’s top 20 funds meanwhile, accounted for close to a third of total deal value.
Following a record year for exits in 2021, exit value fell 33% year-on-year to $132 billion, according to Bain, with three key factors deterring general partners (GPs) from selling: a significant re-rating of public market valuations, fewer avenues for exits given the decline in IPOs, and deteriorating portfolio performance.
In a similar fashion, fundraising in Asia Pacific declined 43% to $105 billion in 2022, 70% below its 2016 peak, according to the report. The share of Asia Pacific-focused funds meanwhile, dropped to 10% of global PE closed funds in 2022 compared with 16% a year earlier.
